The buying procedure in Bulgaria

Foreign persons may acquire a right to ownership of buildings in Bulgaria in their own names through a relatively simple procedure. Also, other types of ownership, like land or forest, can be purchased through a limited liability company established in Bulgaria. Transactions for acquisition of right of property or other real rights on immovable property that must be executed in the form of notarial deed are performed before notary, competent in the area where the real estate is situated. The notary deed is the only legal title document. Buyers can appear in the notary office in person, or be represented by an agent, authorized by a legal Power of Attorney (PoA).

Taxes and fees payable when buying property in Bulgaria

1. Local Tax: 2% of the value of the real estate entered in the notarial deed (which may be less than the true value, but not less than the tax assessment of the real estate).

2. Notarial fee: the size of the notarial fee for a notarial deed is determined in accordance with the certified pecuniary interest of the parties to the transaction. The lowest amount of the fee is 15 BGN for certified pecuniary interest up to 100 BGN. The highest is - 418 BGN + 1% for the sum over 100 000 BGN in cases of certified pecuniary interest over 100 000 BGN. The fee is paid to the notary that certifies the transaction.

3. Deed registration tax: 0.1% of certified pecuniary interest of the parties to the transaction

4. Preparing a Draft of the Deed: 200-400 BGN, depending on notary, number of owners, region, etc.

5. Translation fee: approx. 100 BGN

6. Banking expenses for fees/tax payments: approx. 50 BGN

Owning Property in Bulgaria as a Company

VAT

Value added tax applies to property transactions. The rate of VAT is currently 20%. A foreigner can reclaim the VAT that he has paid for the purchase as long as the buyer is a VAT registered company, established in Bulgaria. Once the property is purchased, VAT incurred on property expenses can be reclaimed. Since 2007 a Bulgarian company may register for VAT voluntarily, so as to recover the input VAT. The procedure for registration and receiving the VAT refund takes roughly six months. Once the VAT refund is received, if the Company sells the property within 5 years, it owes 20% VAT to the state. But if the right to ownership belongs to the Company for more than 5 years, it does not own VAT if the property is sold. The refund is calculated pro-rata over the five year period.

Capital Gains Tax when Owning Property through a Bulgarian company If the company sells the property a chargeable gain will be assessable on the company, which is currently 10%. Corporate Income Tax The company will pay Bulgarian corporate income tax at the rate of 10% (subject to Budget changes) on its letting income less allowable expenses.

Owning Property in Bulgaria as an Individual

Bulgarian Income tax

All the rental profits are assessable on foreign residents with no allowance for expenses. The rate of Bulgarian income tax is 10%.

After Bulgarian legislation (Income Taxes on Natural Persons Act) gains on the sale of assets are taxed as income; the rate is currently 10%. Although under art.13, ITNPA taxability shall not apply to any income acquired during the tax year from the sale or exchange of:

- one residential property, regardless of the date of acquisition of the said property;

- up to two immovable properties, as well as any number of agricultural and forest properties, provided that more than five years have passed between the date of acquisition and the date of sale or exchange;

Double Taxation

Bulgaria and various European countries have bilateral agreements to avoid double taxation; however, we should note that there is no information sharing between the Bulgarian government and the European governments as far as your earnings and possessions in Bulgaria are concerned. In short, you have the responsibility yourself to declare what you own, your capital gains income, and your rental income in Bulgaria to your own governments.